This paper offers a critical perspective on Israel Kirzner’s basic analytical framework.
Specifically, we characterize Kirzner’s emphasis on processes of equilibration as a
departure from the causal-realist price theory developed by Menger and his nineteenth- and
twentieth-century followers. In this context, we contrast Kirzner’s interpretation of
entrepreneurship as discovery with a more realistic, and operationally meaningful, idea of
entrepreneurship as action. Finally, we discuss an inconsistency in Kirzner’s treatment of
the antecedents of entrepreneurial behavior.

The study of entrepreneurship and the study of economic organizing lack contact. In fact,
the modern theory of the firm virtually ignores entrepreneurship, while the literature on
entrepreneurship often sees little value in the economic theory of the firm. In contrast, we
argue in this chapter that entrepreneurship theory and the theory of the firm can be
usefully integrated, and that doing so would improve both bodies of theory. Adding the
entrepreneur to the theory of the firm provides a dynamic view that the overly static
analysis of firm organizing cannot support. Moreover, adding the firm to the study of the
entrepreneur provides important clues to how we can understand entrepreneurship.